Sunday, 15 December 2024
by BD Banks
Costco (COST) appears to go viral on social media every week. Whether it’s because of its popular food court items, eye-catching deals, or “apocalypse” emergency food buckets, the increased social momentum surrounding Costco is translating into a boost in profits and sales.
During the first quarter of 2025, Costco’s total revenue increased roughly 7% year-over-year, while its net sales also spiked by about 7% compared to the same time period last year.
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Even after the wholesale club began cracking down on membership card sharing last year and raised its membership fees in September, it still managed to increase its number of members by almost 8% year-over-year during the quarter.
Related: BJ’s follows Costco with controversial membership change
As the wholesale club skyrockets in popularity, it has been closely monitoring the behavior of its customers and recently spotted a strange change in their shopping habits.
During an earnings call on Dec. 12, 2024, Costco Chief Financial Officer Gary Millerchip said that the company has noticed that its customers are increasingly avoiding fast food and restaurants.
“We are seeing what we think is a little bit of a shift from food away from home to food at home, and that’s certainly reflected in strong meat and produce sales that we’ve seen in our own business,” said Millerchip.
He claimed that premium cuts of meat are selling well at stores, and that customers are gravitating more towards buying lower-priced cuts of chicken, beef, and pork.
Many consumers across the country have been avoiding eating out during a time when many fast-food chains and restaurants have significantly hiked their prices over the past few years. According to a recent report from the Roosevelt Institute, fast-food prices have increased by roughly 47% over the past decade.
Increased prices in the restaurant industry, coupled with an economy that has been plagued with inflation, has caused some consumers to make some drastic changes in order to protect the money in their wallets.
A recent survey from Datassential revealed that 46% of U.S. consumers have cut their spending on restaurant meals and dining out due to inflation and the increased cost of living. Also, 31% of respondents said that they are instead opting to cook food at home in an effort to save money.
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The growing trend has caused some fast-food chains such as McDonald’s, Pizza Hut and KFC to face shrinking sales over the past few months.
During the earnings call, Millerchip also revealed that Costco has indeed noticed that its customers are being more cautious with their purchasing decisions.
“What we’re seeing with our members is that now, probably more than any time in recent history, that combination of newness of items, quality, and value are really important to the member,” said Millerchip. “And we’re seeing the member being very choiceful about how they’re spending the dollars.”
As Costco customers continue to respond to the current economic climate by making major shifts in their spending habits, the company did also address a major concern about an economic policy that was proposed by President-elect Donald Trump that could have a major impact on its business.
Recently, Trump vowed to impose tariffs of 60% to 100% on all goods coming from China, 25% on all goods from Mexico and Canada, and 10% to 20% on goods imported from all other countries as soon as he takes office next year.
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Tariffs are taxes companies pay to import goods from overseas, and often, the extra costs are passed down to consumers, resulting in higher prices for goods/services.
Millerchip did acknowledge that grim reality during the call, however, he stated that Costco has a plan in order to prevent skyrocketing prices in stores.
He claimed that Costco will continue to ramp up inventory buying before the change takes effect, and it will try to work with its vendors in order to mitigate costs. He said that the company will also “consider alternative sourcing locations” and may even pull back on stocking up on low-performing products in stores.
“I guess in context for us, the sort of the amount of business that’s affected, about a quarter of our business is nonfoods, and then a subset of that is imported,” said Millerchip.
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